The Washington Examiner reports:
Falling inflation and a spiking dollar won’t be enough to dissuade the Federal Reserve this week from making the final preparations to raise interest rates for the first time since 2008.
The Fed’s monetary policy committee will meet in Washington on Tuesday and Wednesday. Investors expect that when the meeting is over, the central bank’s announcement will drop its previous promise to be “patient” in waiting to raise short-term interest rates and say instead that the move could come at any subsequent meeting.
“I’d be very surprised if ‘patient’ survived this meeting,” said Paul Mortimer-Lee, global head of market economics for BNP Paribas.
It’s been a long time since the Fed targeted rates above zero. It was in the teeth of the financial crisis in December 2008 that the Fed cut short-term interest rates all the way to zero in an effort to stimulate the economy. Unable to lower interest rates any further, the central bank then turned to the unconventional tools of massive bond-buying programs and promising to keep rates lower for longer.
A half-decade later, the outlook for jobs is nearly bright enough for the Fed to consider moving toward raising rates from zero, even though inflation is below the Fed’s 2 percent target and falling, and a rapidly strengthening dollar threatens to slow exports.
At 5.5 percent in January, according to the Labor Department, the unemployment rate is within the range of what Fed officials project is consistent with an economy at full health.
With unemployment nearly back to normal, Chairwoman Janet Yellen and other officials are set to pull away from the promise to be “patient” in raising rates, even though inflation and the dollar are, at the moment, moving the wrong way.